IRS isn’t bound by a divorce decree when allocating taxes owed by ex-spouses. A husband and wife who each owned rental property deducted large losses on their joint returns. They later divorced. IRS nixed the write-offs and argued at trial that each ex-spouse was jointly and severally liable for a portion of the taxes owed equal to the losses taken for his or her own property, divided by total losses claimed. The divorced couple wanted a 50-50 split of the taxes per their divorce agreement. The Tax Court sided with IRS, saying tax allocations set forth in the decree do not control the couple’s liabilities to the agency (Asad, TC Memo. 2017-80).

Paying your ex more than what’s in a divorce agreement nixes a tax break.

The payments aren’t deductible alimony, the Tax Court decides in this case. A couple’s divorce decree required the ex-husband to pay alimony of $2,000 a month until the sale of the couple’s home. After that, the monthly payments go up to $8,000. When they couldn’t sell the home because of a downturn in the real estate market, he orally agreed to pay her $3,000 a month more. He can’t deduct the extra payments because the modification wasn’t formalized in writing (Bulakites, TC Memo. 2017-79).

IRS Isn’t Bound by A Divorce Decree

by | Jun 13, 2017 | Alimony, Debt, IRS, IRS Audit, IRS Letter, Tallahassee Tax Service, TallyTaxMan, Tax court | 0 comments